Nailing Down the Right Amount: A Guide to Investing in Gold

Precious metals outperform the S&P 500

Precious metals, including gold, silver, and platinum, have substantially outperformed the S&P 500 over the past year. Over that time, gold has gained 72% compared to the stock market index’s gain of 20%.

Uncertainty drives gold’s price

Much of that can be attributed to traditional catalysts for the price of gold, including uncertainty around President Donald Trump’s tariff policies, global conflicts, and ongoing inflation, all of which have helped propel the precious metal into the spotlight.

Investors should diversify their portfolios

Investors who are tired of elevated stock market volatility and low yields on fixed income assets should consider adding precious metals to their portfolios, but that doesn’t mean they should sell everything and go all-in on gold.

Understanding gold’s weaknesses

Investors who want to put everything into gold already know about the precious metal’s strengths. It is an inflation hedge and a unit of value that has been around for thousands of years. Empires have come and gone, but gold has retained value through all of those civilizations.

Gold has its flaws

However, gold — like all assets — has its flaws. As it doesn’t provide yield, it won’t generate cash flow for retirees. You must sell gold to cover living expenses, while dividend stocks and fixed income assets can provide enough passive income without chipping away at your position.

Gold can miss out on long-term trends

Gold can also miss out on long-term mega trends like e-commerce, cloud computing, and, more recently, artificial intelligence. Stock pickers who find the right companies can outperform gold by vast margins.

It’s easy to forget about an asset’s historical shortcomings

It’s easy to forget about an asset’s historical shortcomings when it has substantial momentum. Investors also tend to forget how well an asset has historically performed when it is in the middle of a slump.

Gold’s price can fluctuate

Although gold has outpaced the S&P 500 over the past year, that wasn’t always the case. For instance, gold dropped by more than 25% in 2013, while the S&P 500 rallied by roughly 30% that year. This is one of several examples when gold trailed the stock market over a long period of time.

Precious metals can overheat and crash

Precious metals can also overheat during their big runs and leave new investors holding the bag. Silver provided an excellent case study earlier this year. The precious metal has been surging over several months due to scarcity and high demand, outperforming both stocks and gold in 2026. But the asset reached a breaking point on Jan. 30 and crashed by more than 30%.

It’s better to buy gold before uncertainty strikes

It’s better to buy gold and other assets before uncertainty strikes. Calmer, bullish economic cycles present good opportunities to accumulate gold before the next conflict, tariff, or other malefactor rattles investors.

How gold fits into a portfolio

As previously mentioned, all assets have their strengths and weaknesses. While gold’s strengths have been notable in recent years, that doesn’t mean you should go all-in on this asset. However, that doesn’t suggest staying on the sidelines is the right choice either.

Gold should be part of a diversified portfolio

The proper balance varies for each person, depending on their risk tolerance and long-term financial goals. Young investors have more time to wait for reliable stocks to regain momentum. They can also afford to take additional risk since they won’t retire for multiple decades. Investing serves as a means to an end. Growing your money now gives you more choices and can result in a seamless retirement, and equities offer the highest growth potential.

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